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PepsiCo Fourth-Quarter Profit Gains 17% on Higher Prices

PepsiCo Inc. said fourth-quarter profit rose 17 percent, helped by higher prices, and authorized a new plan to repurchase as much as $10 billion in stock as the world’s largest snack-food maker returns cash to investors.

Net income increased to $1.66 billion, or $1.06 a share, from $1.42 billion, or 89 cents, a year earlier, the Purchase, New York-based company said today in a statement. Profit excluding some items totaled $1.09 a share. Analysts had projected $1.05, the average of estimates compiled by Bloomberg.

Chief Executive Officer Indra Nooyi has increased prices and worked to boost sales with new products, such as Gatorade Energy Chews and Pepsi Next. PepsiCo has spent more to market brands including Lay’s and put a renewed focus on U.S. soft drinks to revive lagging beverage sales and regain market share from Coca-Cola Co.

PepsiCo, the world’s second-largest soft drink maker, rose 1.1 percent to $72.28 at the close in New York. The shares have advanced 5.6 percent this year, compared with a 1.6 percent increase for Coca-Cola.

The company’s $10 billion share-repurchase will be from July 1, 2013, through June 2016. PepsiCo will also boost its annualized dividend by 5.6 percent to $2.27 a share starting in June. In 2013, PepsiCo intends to pay dividends of $3.4 billion and buy back $3 billion of its shares.

Annual Forecast

Earnings per share in 2013 will increase 7 percent from the $4.10 in 2012, implying profit of $4.39. Analysts projected $4.41, the average of estimates compiled by Bloomberg.

Chief Financial Officer Hugh Johnston said on a conference call today that the company sees no need for large-scale acquisitions. PepsiCo has also asked for approval from the U.S. Food and Drug Administration for new sweeteners, Nooyi also said on the call.

Any restructuring of the company’s beverage bottling business in North America won’t be addressed until early 2014, Nooyi said on the call. That extends a timeline Johnston laid out one year ago, when he said PepsiCo would evaluate its beverage distribution operations in North America through this fall and consider whether to make changes, including divestiture.

“We certainly wouldn’t want to make a change in the business structure while there’s still opportunities to unlock value that might be better unlocked while PepsiCo still owns the business,” Johnston said in a conference call with journalists, declining to elaborate.

Fourth-quarter revenue fell 1 percent to $20 billion. Analysts projected $19.7 billion, on average.

PepsiCo Americas Foods volume grew 6 percent in the quarter, helped by acquisitions and higher sales of Frito-Lay products in North America.

Coca-Cola, based in Atlanta, said Feb. 12 that net income rose 13 percent to $1.87 billion as sales of non-carbonated drinks in North America such as Powerade helped counter lower demand in Europe. Revenue advanced 3.8 percent to $11.5 billion, less than analysts estimated.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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